The Addis Ababa Action Agenda contains 14 distinct policy commitments on achieving financial inclusion, including strengthening access to finance and financial services for households and micro, small and medium-sized enterprises (MSMEs). The policy commitments include the use of innovative instruments and technologies, a range of providers (e.g. cooperative banks, postal banks and development banks), and the adoption of financial inclusion strategies. The Addis Agenda brings the financial inclusion and regulatory agendas together, by acknowledging the implication of regulations on access to financial services, while also noting the importance of robust risk-based regulatory frameworks for all financial intermediation. Financial inclusion is universal access to and usage of a wide range of affordable financial services, provided by a variety of sound, responsible and sustainable financial service providers. Inclusive finance strives to enhance access to and usage of financial services for both individuals and MSMEs. Studies show that when people participate in the financial system, they are better able to start and expand businesses, invest in education, manage risk, and absorb financial shocks. Access to accounts and to savings and payment mechanisms increases savings, empowers women, and boosts productive investment and consumption. Access to credit also has positive effects on consumption—as well as on employment status and income and on some aspects of mental health and outlook. Greater access to financial services for both individuals and firms may help reduce income inequality and accelerate economic growth, especially in countries with low starting points for financial inclusion and shallow financial sectors.
As of 2014, 62 per cent of the world’s adult population has an account, up from 53 per cent in 2011. Around 700 million adults worldwide gained access to bank accounts over this period. However, there are still two billion people, primarily in rural areas in developing countries, who do not have access to formal financial services. The percentage of people who have an account increased in each country grouping from 2011 to 2014, with the greatest increase in middle-income countries (34.2 to 44.6 per cent). However, while more than 80 per cent of adults in developed countries have accounts, less than 50 per cent have accounts in developing countries, and only 21.5 per cent have accounts in LDCs in 2014. In addition, access on its own is not sufficient. The quality of services and utilization rates are also important.
Global Findex data suggest that countries that adopt financial inclusion strategies reduce exclusion twice as fast as those that do not. National financial inclusion strategies (NFIs) have gained traction in recent years and are becoming an increasingly common policy approach for countries to lay out a plan to address the financial inclusion gap. As of July 2017, there were 63 NFIs in 94 country members of the Alliance for Financial Inclusion (AFI). These commitments are commonly known as “Maya Commitments”, as they refer to common principles laid out in the “Maya Declaration” of the AFI. Poorer countries are more likely to have strategies for financial inclusion, which is not surprising, given that they also tend to have lower degrees of financial inclusion, and are more likely to benefit from nationwide efforts to improve financial access. The map does not display developed countries that have developed a financial inclusion strategy, however, some developed countries, including the UK, have also developed strategies.
Firms in LDCs are least likely (less than 25 per cent) to have a bank loan or line of credit. The gap with developed is nearly 20 per cent. Micro, small and medium-sized enterprises (MSMEs) cite lack of access to finance as a major constraint across both developed and developing countries, but it is particularly acute in developing economies. More than 200 million MSMEs in developing countries lack adequate financing. The unmet financing needs of MSMEs was estimated to be $5.2 trillion in developing countries, or 1.4 times the current level of MSME-lending. While the gap varies considerably among regions, it’s particularly wide in LDCs. There is also a $300 billion credit gap for women-owned SMEs, with 80 per cent of women-owned SMEs’ credit needs unserved or underserved. Women-owned businesses comprise 28 per cent of MSMEs and account for 32 per cent of the MSME finance gap.
LDCs, especially African LDCs show a clear decreasing trend in starting business costs since 2013, but the pace is getting slower. Countries in Latin America and the Caribbean show a small increase at starting business cost since 2015. Since World Bank Enterprise Analysis Unit did surveys in different years for different countries, the latest available survey data is used for each country. Share is likely to be significantly higher for Europe than represented in the figure as data includes only a limited number of high-income countries. See IFC's article on Access to Credit among Micro, Small, and Medium Enterprises for more information.
Financial capability is critical for people to be able to make sound decisions regarding their finance and use of financial services. Financial literacy is seen as one element of financial capability and has proven to be important for employability as well the ability of individuals to start and manage their own enterprises.
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The Standard & Poor’s Global Financial Literacy Survey, which probes knowledge of four basic financial concepts—risk diversification, inflation, numeracy, and interest compounding—based on interviews with more than 150,000 adults ages 15-34 in over 140 countries, found that on average more than 50 per cent of adults are financially literate in developed countries, while an average of around 37 per cent of adults are financially literate in developing countries. Women’s financial literacy is consistently lower than men’s—worldwide there is a gap of five per cent (30 per cent versus 35 per cent). The survey found that financial literacy is far more expansive in Oceania than the other regions. However, there is intense variability within regions.
As of 2015 according to the OECD, some 34 countries had financial literacy strategies, with another 25 actively being designed, and another 5 being planned. This represents a doubling of the number of strategies from just five years before. G20 Leaders have highlighted the importance of financial education and literacy and committed themselves to take action to further advance effective policies. In particular, they endorsed in June 2012 the High-level Principles on National Strategies for Financial Education which supports the development of nationally co-ordinated and tailored approaches to financial education.
Adequate skills are essential for employability and career advancement, particularly for youth as they enter the labour market. Adequate skills are critical for employers, for whom the presence of such skills translates into better performance. For governments, ensuring that the population has adequate skills helps them have reduced unemployment and can help combat informality. Amongst UN agencies, the International Labour Organization (ILO) supports skills training of member countries.
The skills gap measures the difference between the skills required by companies in various sectors of the economy and the actual skills available. The skills gap varies based on type of economies. Low-income countries have the lowest skills gap, suggesting that a lack of appropriately skilled workers is not the limiting factor in a country’s development. Rather, other factors such as the availability of skilled-work and infrastructure to support industrial development may be holding these countries back.
Upper middle-income countries have the highest skills gap of the income groups, demonstrating that with economic development comes the need for more specialized and skilled labour. Future study may be warranted to explore if the skills gap is a particularly large inhibitor to countries transitioning from middle-income to high-income, or industrial to post-industrial, economies.
A range of innovative tools is being developed and deployed to increase access and promote usage of a range of financial services. Many of these are technology-driven, and a number of them focus on facilitating payments—whether domestic or international, between people, or enabling payments between people, businesses, and government. One such example is mobile money, which has evolved from operating as a purely domestic P2P transfer service to enabling transfers between 90 countries globally. 62 per cent of Kenyans are active mobile money users, largely through the M-Pesa mobile payment system. This has contributed enormously to the rise of financial inclusion, from 41 per cent in 2009 to 67 per cent in 2014. The presence of a range of financial services providers is particularly important in areas with low population density where costs structures make it difficult to deliver financial products and services through traditional channels.